Design: The driving force behind intangible capital? Case Design Index companies

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School of Economics | Master's thesis
International Design Business Management (IDBM)
International Design Business Management (IDBM)
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Nowadays design is considered as a source of competitive advantage in the business world (e.g. Nyberg & al., 2005; Gemser & al., 2011) and its impact on financial performance has been demonstrated (e.g. Design Council, 2004; Teknikföretagen, 2011). Yet, the underlying connection between the use of design and financial performance remains relatively unknown (Hertenstein & al., 2005). One way to understand this connection is through the reinforcing effect of design on the return on investment in other tangible or intangible capital. The relevance of intangible capital is particularly high in the knowledge-intensive economy (Daum, 2004, pp. vii-viii), though few have studied or demonstrated the impact of design on it. In addition to the theoretical shortage of design as a resource accumulating intangible capital, the empirical demonstration of its effect has received little attention. The purpose of this study is to understand the relevance of design as a resource driving the intangible capital of a company. The first part of the study establishes through theory how design builds the intangible capital of a company by impacting all its three categories of human, structural and relational capital. On the basis of earlier studies the market-to-book ratio is found as a possible indicator for the level of intangible capital within a company. Finally a case study on active users of design chosen on the basis of prior research by the UK Design Council is conducted with comparing 19 design effective companies against a control group of 76. Results of the case study show that although the case study companies do not have markedly higher portion of intangible capital, a further division of the companies into three subgroups of product, service and retail offers interesting insights. In particular it is noted, that product offering firms with active use of design tend to have significantly higher share of intangible capital in comparison to the control group. Data was obtained through the London Stock Exchange for the years 2007-2011.
design management, design, intangible capital, intangible assets, resource-based view, company value